What happened to Hive? Why did the price fall?
I've seen this exact question in a short form message and I don't exactly remember on which platform it was. I started to give an answer but this answer simply didn't fit into a short message or two or three of them. I gave up and decided to keep the thought alive and make a post about it. Here it is...
So why is the price of Hive falling?
Is it because people power down and take their money out? Is it because the DHO pays too much money? Is it because there is not that much development on the chain? Is it because of the inbuilt inflation of the Hive token? Is it because of the 15% APR that is paid on HBD?
I would say that all this may contribute to prices going down but in my opinion this isn't the main reason.
The fish is moved by the current
With every year, the crypto world becomes more interconnected and institutionalized. This has several effects that can be neglected. A couple of years back, we could see the share markets drop in price and BTC going up. Nowadays, when the share markets plunge, crypto follows as well most of the time. Funds, derivate products, leveraged products, aggregated products have lead to this phenomena. The same happened in the fiat finance sector over the years. Everything is more and more correlated. Things move more in synchronization.
I have watched a report from a private research equity team. They have found out that the correlation between asset categories has become so strong that they deemed diversification a waste of resources. Their research tries to figure out which assets outperform the markets rather than to create an equilibrated portfolio.
Let's take the picture of an ocean and you have all the assets in the world that are represented by a fish. Some fishes are bigger, some are stronger, some are weaker but all of them are affected by the currents of the ocean. When the current pushes, they go more or less all in the same direction. Some faster, some slower, some try to fight the current but they struggle. We could say that with the internet and the automatization of the markets this currents have become much stronger and the fishes can hardly extract themselves from the direction of the current.
Ok, and what has all this to do with the price of Hive?
Hive is a rather small fish and when the current pushes prices down, hive is following suit. So when we look at the evolution of the hive price, we always need to see the broader picture. How is the market evolving? If everything is red, we shouldn't be surprised that hive goes down in price as well.
On the other side we often also see that hive is pulled along when the markets go up. However, often not as strongly as the rest of the market.
I don't believe that's true?
Well I can understand that but the best way to verify this theory is to look at the real correlations. On Defillama you can actually have a look at how correlations are among different tokens.
I put Hive in comparison with BTC, ETH, SOL and BNB over the last year. It was interesting to see that the Hive shared the biggest correlation with ETH and a positive correlation with all the other assets. The closer the correlation is to 1, the more the tokens evolve in parallel. A correlation of zero would mean that there is no correlation at all. A correlation of close to -1 would mean that the tokens evolve in exact opposition.
Of course, not all tokens evolve exactly the same but the correlation is there and in my opinion getting stronger. The more a token is linked to the other ecosystems, the stronger the correlation will get. This means that hive will be linked stronger to the market if it gets bigger and more interlinked. Every new listing on CEX's and DEX's, every new basket where hive is a part of, every derivate product on hive contributes to that. Is this bad? Is this good? I think that we need to get as much interlinked with other blockchains and the markets to have the option to real become a bigger player in the crypto world and to attract more funds.
As a small fish, Hive has its own ecosystem but it is limited in size and number of users. It will go down with the markets but go up slower than the markets because funds evade it. We need to be interlinked with the markets as much as possible to profit from them when they go up...
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Interesting. I think there is also a correlation with the blockchain being slowed down by just one bad actor. We need to be much more resilient and have more nodes.
I didn't hear about that. Could it be that you're confusing the hive-engine, which is a second layer, with HIVE?
there are 2 distinct nodes HE nodes for Hive engines, and Hive nodes. Both of them were affected. We had someone putting something like 300.000 buy/sell orders using a bot, slowing down to a halt basically everything.
It was scary to see that one bad actor could stop HE from working. I believe that the new witness software is more resilient now but I agree that such things shouldn't happen at all...
Not enough node or not enough processing power. Either way is not good enough. Imagine a state supported attack on Hive, there is no chance to stop it.
Very interesting insights and i do not disagree with any of it.
I do think it is important to keep in mind that any investment should be long term and Hive can do really well long term.
People need to build, develop and commit to the platform it is what we make it after all.
Funny things about all markets they go up and down.
Who knows where and what Hive will be worth in 10- 15 years time.
We have to ask what did we do to make it successful?
Great post as ususal @achim03
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That's a very good point. Hive belongs to all of us and we shouldn't just think what can hive do for us but what we can do for hive in the first place!
Expanding Hive's connections with other blockchains and markets could definitely open up more opportunities and bring in additional funds.
The ecosystem is unique, but you're right, it has its limitations in terms of size and user base.
Being more integrated with the broader market could help Hive move in sync with upward trends instead of lagging behind.
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I think that if hive has real trustworthy small contracts it could interact much more easier with other chains. This is probably the biggest factor that holds hive back at the moment.
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It's a bit sad to hear that we are correlated with ETH. ETH hasn't done as well and I honestly don't have too much faith that it will even pass its previous ATH. I agree that Hive needs to stand out and it needs to develop more so I think it has a more promising feature compared to ETH.
It doesn't really speak for hive to be correlated with ETH but it's what it is. I believe we would need secure smart contracts to play with the young dynamic chains.
Hive is a fork from steem. So there is that!
I think what binds us back most is the fact that we have no real smart contracts which would enable to plugging in with other chains.
With each cycle, I'm turning more and more into a BTC Maxi. At this rate, I will probably hold only 2 cryptos in my portfolio eventually! 🤣
I like BTC and I like Hive but I start to like also other chains like Solana or SUI. Each can do things that the others struggle with...
Wow I didn't know Defillama has this function! Time to play around with some of the tokens I have. Hehe!
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For me this really helps when choosing what pools I want to provide liquidity to.
I agree with your illustration of the ocean current and the fish, as it concerns Hive. Power down also affects the price of Hive.
Power downs affect hive prices only if people actually sell the tokens.
I Appreciate your clarification, thanks.
Interesting explanation there about hive fall in price. I am of the opinion that what contribute to the fall in hive price is the fact that the adoption and use of Hive have a smaller population, if the population increases beyond what we have couple with more nodes, correlation, blockchain and other currencies, the percentage at which hive will fall when the likes of btc and eth drops will be drastically reduce. Tha for sharing.
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It's true that more people using the platform would help things in a big way...
It's interesting that you discovered that HIVE is correlated the most with ETH, among the big caps. That means that if ETH will have a slow bull cycle, so might HIVE. But on the other hand, if ETH explodes at some point...
It's really interesting to look at these correlations and I'm not sure that being correlated to ETH is very positive but I think that it's always good to see the big picture before people start to blame the small fishes who are powering down 10 hive...
I appears that ETH going down a lot and RUNE as well was the main reason why LEO took a serious hit lately due to its main LPs being in those ecosystems or strongly connected to them.
Profit-taking is a very accurate term, but it's hard to predict, man, I didn't expect Hive to go back down to 68 cents and I don't think anyone did. It's not specific to Hive, people thought the crazy bull was coming but Trump may have prevented it with his tax decisions etc.
So far the new president had a mixed influence on crypto. It's also a good example to see how crypto are linked more and more to the traditional financial markets. In the past, taxes would have meant pressure on currencies and therefore people would have invested in BTC to compensate it. Nowadays, when things go down, everything goes down...
I was not expecting this correlation. I found the correlation for SPS is strongest with ETH and S (FTM) outside of HIVE.
I didn't check out SPS. It's quite interesting to look at these correlations.
thx for the information. i didnt know before.
You are welcome :-)
Learning as I go, about what is on the Hive blockchain, I have been debating about whether or not I would ever participate in writing something. With a little time this morning to look at different posts, the thought has come up again, while reading through this post.
I found it informative in providing information which was not previously known to me. So, I have decided to write my first comment, @achim03, to let you know that. The interconnection among asset classes is an important topic. At least for any of us who are making any effort to learn about how best to save our money from the very powerful forces of inflation relentlessly working to reduce its buying power.
From your post, I now have a better idea about the HIVE token. And can now come up with a better informed decision about investing in it. I really liked being introduced to this DeFiLlama correlation tool, so have bookmarked it, for future reference.
What it represents to me is more support for how powerfully all the new institutional money coming into this asset class is affecting it. Some would call it Smart Money. I guess we are all witnessing and / or experiencing what that means.
Now I will post this and experience a little more about the Hive blockchain. By following your account, since I see you write about topics that will be interesting for me. And vote for my first witness.
Following up, I am writing to let you know something did not work with this:
Source: Following the Liotes Hive Witness link, at the bottom of your post
When I went to the Witness page, using PeakD, I still did not have any Witnesses showing up as Approved.
I did figure out how to find the transaction history, which appears to confirm that my vote did get registered as Approved.
Maybe a time lag of some sort on PeakD's Witness page? After this much time has gone by? Well, I do not know, but thought you might want to know.
FWIW, coming back to check, I now see that my Witness vote is showing on PeakD's Witness page. Why it took this much time, on a blockchain that markets how quickly its transactions are executed is unknown to me.
Anyway ... No need to respond, as it did show up eventually.